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Dow Jones Futures: Inflation Report, Fed Big Tests Market Rally

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Dow futures will open Sunday night, along with S&P 500 futures and Nasdaq futures, with the focus squarely on the CPI and Federal Reserve inflation report.




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Last week’s stock market rally has eased as major indices continue their trend of climbing to new highs and then fading again. It is a challenging environment to buy stocks.

Next week investors get a shot or two on important economic news. On Tuesday, the Labor Department will release its CPI inflation report for November. On Wednesday afternoon, the Federal Reserve will raise interest rates again with Federal Reserve Chairman Jerome Powell giving signals about further tightening in early 2023.

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This may be a catalyst for large market gains or losses, or intermittent side actions may continue. Investors will likely wait for the inflation report and Fed news before adding exposure.

Breakout failures or failures are widespread, with DXCM stock pulling back on Friday after briefly vacating a buy point Thursday on FDA approval.

But there are five stocks to watch: the Dow Jones giants Larva (cat) And the Goldman Sachs (p), Sanmina (I will sleep), Makison (MCK) And the MercadoLibre (millie). To be clear, none of these stocks can be actioned, with MELI stock in particular in need of some work.

Microsoft (MSFT) performs relatively well for adults, with apple (AAPL) is less than the 50-day line and Tesla (TSLATry to avoid setting new bottoms for the bear market. But MSFT stock is still well below the 200-day line and hasn’t made much progress over the past month.

The video embedded in the article reviewed market movement in depth and analyzed it dexcom (DXCM) and MercadoLibre and CAT stocks.

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Economy, the S&P 500 faces a hard landing – unless the Fed does


CPI inflation and the Fed meeting

Early Tuesday, the Labor Department will release the Consumer Price Index for November. Both headline and core inflation rates in the CPI should fall over the next several months, if only because comparisons are getting tougher. But prices for services have been stubbornly strong.

The Fed wants to see more substantive declines in service inflation, as well as wage gains, before halting interest rate hikes. At 2pm ET, the Fed is expected to raise the federal funds rate by 50 basis points, to 4.25%-4.5%, ending a series of four hikes of 75 basis points. Investors will want some clues about the February meeting, and how high the fed funds rate might eventually hit. Markets are currently pricing in another half point Fed rate hike in February, although there is a good chance of a quarter point move.

Fed Chair Powell’s comments at 2:30 PM ET, along with the Consumer Price Index inflation report, may set the tone for Fed policy heading into 2023.

Powell and many policymakers have indicated that a recession may be necessary to bring inflation under control.

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Dow jones futures today

Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.

Remember to work in overnight Dow Jones futures contracts and elsewhere that does not necessarily translate into actual trading in the next regular session Stock market session.


Join IBD experts as they analyze actionable shares in the bullish stock market on IBD Live


Stock market rise

The rally in the stock market has seen significant declines for major indices in the last week.

The Dow Jones Industrial Average fell 2.8% in the past week Stock market trading. The S&P 500 lost 3.4%. The Nasdaq Composite Index fell 4%. Small cap Russell 2000 fell 5.1%.

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The 10-year Treasury yield rose 6 basis points to 3.57%, rebounding from 3.4% in the middle of the week.

US crude oil futures fell 11% to $71.02 a barrel last week, with gasoline futures down 9.8%. Both hit their lowest levels in 2022. Natural gas prices fell 0.6%.

Exchange Traded Funds

Among the major growth ETFs is the iShares Expanding Technology and Software Sector Fund (IGV) fell 4.6%, with Microsoft’s main share holding. VanEck Vectors Semiconductor Corporation (SMH) decreased by 1.7%.

Reflecting more speculative stories, the ARK Innovation ETF (ARK)ark(down 9.2% last week and the ARK Genomics ETF)ARKG) 8.1%. TSLA stock is a huge holding via Ark Invest ETFs.

SPDR S&P Metals & Mining ETFs (XME) lost 6.4% last week. Global Infrastructure Development Fund X US (cradle) decreased by 2.85%. US Global Gates Foundation ETF (Planes) fell 3.3%. SPDR S&P Homebuilders ETF (XHB) decreased by 2%. Energy Defined Fund SPDR ETF (xle) fell by 8.45%, decisively breaking the 50-day line. SPDR Financial Selection Fund (XLF) fell 3.9%. SPDR Health Care Sector Selection Fund (XLV) fell 1.3% after rising in eight of the previous nine weeks.

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Top five Chinese stocks to watch now


Megacap shares

Apple stock is down 3.8% in the past week, falling below that key level on Tuesday and hitting resistance there on Friday. Bad news regarding iPhone production may be priced in, and AAPL stock is on the rebound.

Microsoft Dow tech titan also fell 3.8%, but held support at the 21-day line, modestly above the 50-day high. But it is well below the 200-day line. MSFT stock is basically flat against last month, as are the S&P 500 and Nasdaq.

Tesla stock is down 8.1% in the latest week, even as Friday traded up 3.2%. TSLA stock is jumping above the recent bear market lows. Tesla announced new incentives for China last week with widespread media reports that the Shanghai plant would cut production significantly over the next few weeks, even halting production of the Model Y.


Tesla vs. BYD: Which EV giant is the best to buy?

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Stocks to watch

Caterpillar stock fell 3.7% to 227.29 last week, undercutting the 21-day line. Backtracking can end up being a constructive jolt. CAT stock contains Point purchase At 238″ or 239.95″ tall cup base. In another week, the heavy equipment giant may have a Dow Flat base With 239.95 points of purchase. A slightly longer pause could allow the rapidly rising 50-day line to narrow the gap with CAT stock.

Goldman stock fell 5.6% in the most recent week to 359.14, surpassing a breakout from a cup base With 358.72 buying points, before rising slightly above it. A strong bounce from here could provide a fresh entry, especially if the 50-day or 10-week line catches up. On the weekly chart, GS stock has a 13-month lead Cup base with handlewith 389.68 buy points, according to MarketSmith Analysis. The past week has now created more depth on this handle, which could also become a flat base in a week.

Sanmina fell 7.3 percent to 62.48 last week. SANM stock was firmly consolidating in profit-taking territory after the October breach from the base of the cup. Stocks could start to pull back to the 50 day/10 week line, offering a buying opportunity, although the weekly decline was surprising. The SANM stock also runs on a potentially flat base.

McKesson stock fell 4% to 371.37 last week, and on Friday it fell below its 50-day and 10-week lines. MCK stock is making a fresh consolidation after the November 10-11 sell-off that hit several defensive medical stocks. A move above 389.45 Dec 2 high could provide an early entry, still close to the moving averages.

MELI fell 5.1% to 896.48, its fourth consecutive weekly decline. The Latin American e-commerce and payments giant has 1,095.44 buy points, with a trend line entry around 1025. A violent entry could be a decisive retracement of the moving averages for MELI stock, with a December 2 high of 957. While MercadoLibre stock was trending lower, The weekly losses come in lighter volumes with some relatively strong positive closes.

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Market rally analysis

A week ago, the stock market was hitting new highs, with the S&P 500 above its 200-day line for the first time in months. But as investors reassessed the jobs report and Fed Chair Powell’s comments, major indexes fell.

The S&P 500 fell below the 200-day line, while the Nasdaq tested the 50-day line. Both hit resistance at the 21-day line late in the week. The Russell 2000 fell below the 200-day and 21-day lines and reached the 50-day line, lowering its streak by 10 weeks.

The bullish Dow Jones index holds support near 21 days.

The S&P 500 was basically where it was after November 10, when the October Consumer Price Index inflation report boosted stocks. The Nasdaq and Russell 2000 both returned to early November levels, but also in late October.

If you had to design a scenario to get investors to get into extreme situations frequently, this current bullish trend could be the blueprint: a market rally for some big gains in one day followed by a pullback over several sessions.

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The market’s upside is still certain. However, more losses, like the Nasdaq or more specifically the S&P 500 breaking through the 50 day lines clearly, would be concerning.

The November CPI inflation report, the announcement of Wednesday’s Fed meeting and Powell’s comments could provide the catalyst for a sustained rally in the market, or a decisive sell-off. But it could also spur another big market that looks decisive, then followed by another downturn.


It’s time to market with IBD’s ETF Market Strategy


What are you doing now

Investors should beware of adding exposure until the CPI inflation report and Fed meeting are in the rearview mirror. Even if markets jump on inflation data and Fed Chair Powell’s comments, investors should be selective about new purchases, in case major indexes simply decline over the next several sessions.

At some point, a sustained and steady rally in the market will take hold. When that happens, buying opportunities will be plentiful.

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So get your stock market holiday shopping list ready. A large number of stocks from a variety of sectors are being created or about to be created.

Read The Big Picture Every day to keep up with the market trend, stocks and leading sectors.

Please follow Ed Carson on Twitter at @tweet For stock market updates and more.

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Stock, bond and cryptocurrency investors remain on edge after a rough year for the markets

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This version is for personal, non-commercial use only. Distribution and use of this material is subject to our Subscriber Agreement and copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.

https://www.wsj.com/articles/stock-bond-and-crypto-investors-remain-on-edge-after-brutal-year-for-markets-11672403124

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Dow Jones losses are heading towards the closing bell as US stocks approach their worst year since 2008

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US stocks were trimming losses heading towards the closing bell on Friday, but were still on track to post their worst annual loss since 2008, as the harvest of tax losses combined with concern over the outlook for US corporate and consumer earnings took its toll.

How are stock indices traded?
  • Dow Jones Industrial Average
    DJIA,
    -0.22%

    It fell about 182 points, or 0.6%, to 33,039 points.

  • S&P 500 index
    SPX,
    -0.25%

    It fell nearly 26 points, or 0.7%, to about 3,824.

  • The Nasdaq Composite Index fell 72 points, or 0.7%, to about 10,406 points.

Stocks posted their biggest gains of the month on Thursday, with the Dow Jones rising 345 points, or 1.05%, to 33,221 as major stock indexes rebounded after losses incurred earlier in the week that pushed the Nasdaq Composite to a new closing low for the year. . The S&P 500 was on track on Friday to wrap up its fourth consecutive losing week, the longest streak of weekly losses since May, according to FactSet data.

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What drives the markets

US stocks traded lower on Friday afternoon, on pace to close the last trading session of 2022 with weekly and monthly losses.

Stocks and bonds have been crushed this year as the Federal Reserve raised its benchmark interest rate more aggressively than many expected, as it sought to crush the worst inflation in four decades. The S&P 500 is on track to end the year with a loss of nearly 20%, its worst annual performance since 2008.

“Investors were on edge,” Mark Heppenstahl, chief investment officer at Penn Mutual Asset Management, said in a phone interview Friday. “It seems as if being able to bring prices down might be a little easier given how bad the year has been.”

Stock indices have fallen in recent weeks as the recent rally inspired by hopes in the Fed’s policy focus faded in December after the central bank indicated it would likely wait until 2024 to cut interest rates.

On the last day of the trading year, the markets were also hit by selling to capture losses that could be written off from tax bills, a practice known as tax harvesting, according to Kim Forrest, chief investment officer at Bouquet Capital Partners. .

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Forrest added that an uncertain outlook for 2023 has also weighed in, as investors worry about the strength of corporate earnings, the US economy and consumer as the fourth-quarter earnings season approaches early next year.

“I think the Fed, and then earnings in mid-January — they’ll set the tone for the next six months. Until then, it’s anyone’s guess.”

The US central bank has raised its benchmark interest rate by more than four percentage points since the start of the year, pushing borrowing costs to their highest levels since 2007.

The timing of the first Fed rate cut will likely have a significant impact on markets, according to Forrest, but the outlook remains uncertain, even as the Fed tries to signal that it plans to keep interest rates higher for longer.

On the economic data front, the Chicago PMI for December, the latest major data release for the year, Came stronger than expected. Climbing to 44.9 from 37.2 in the previous month. Readings below 50 indicate contraction.

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In the coming year, Heppenstahl said, “we are likely to shift toward concerns about economic growth rather than inflation.” “I think the decline in growth will eventually lead to an even greater drop in inflation.”

Read: Stock market investors face 3 recession scenarios in 2023

Eric Sterner, chief information officer at Apollon Wealth Management, said in a phone interview on Friday that he expects the US to fall into a recession next year and that the stock market could see a new bottom as companies likely review their earnings. “I think the earnings outlook for 2023 is still very high,” he said.

The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite were all on pace Friday afternoon posting weekly losses of around 1%, according to FactSet data, at last check. For the month, the Dow was down about 5%, the S&P 500 was down about 7% and the Nasdaq was about to crash down about 10%.

Read: Value stocks are outperforming growth stocks in 2022 by a large margin historically

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As for bonds, Treasury yields rose on Friday as the US sovereign debt market was set to post its worst year since at least the 1970s.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.879%

It rose about four basis points on Friday at 3.88%, according to FactSet data, in the latest check. Ten-year yields jumped about 2.34 percentage points this year through Thursday, on track for the biggest annual gain ever based on data going back to 1977, according to market data from Dow Jones.

Meanwhile, the yield on the two-year note
TMUBMUSD02Y,
4.423%

Up about 3.64 percentage points in 2022 through Thursday to 4.368%, 30-year return
TMUBMUSD30Y,
3.971%

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It jumped 2.03 percentage points over the same period to 3.922%. That marks the largest increase in a calendar year for each based on data going back to 1973, according to market data from Dow Jones.

Outside the US, European stocks capped their biggest percentage drop in a calendar year since 2018, with the Stoxx Europe 600
xxxp,
-1.27%
And the
It is an index of euro-denominated stocks, down 12.9%, according to market data from Dow Jones.

Read: A downturn in the US stock market is trailing these international ETFs as 2022 draws to a close

Companies in focus

Steve Goldstein contributed to this article.

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Fed’s reverse repo facility reaches $2.554 trillion by Reuters

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© Reuters. FILE PHOTO: The Federal Reserve Building in Washington, US, January 26, 2022. (Reuters)/Joshua Roberts/File Photo

Written by Michael S Derby

NEW YORK (Reuters) – A key facility used by the Federal Reserve to help control short-term interest rates saw record inflows on Friday, the last trading day of the year.

The New York Fed said its reverse repo facility took in $2.554 trillion in cash from money market funds and other eligible financial firms, beating the previous high seen on Sept. 30, when inflows totaled $2.426 trillion.

The cash rally was almost certainly tipping into record territory in the usual end-of-quarter pattern that could worsen further towards the end of the year. On those dates, for a variety of reasons, many financial firms prefer to deposit money in the central bank rather than in the private markets.

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The Fed’s reverse repo facility has been very active for some time. After seeing almost no absorption for a long time, money began to gravitate toward the central bank in the spring of 2021 and then grew steadily. Daily reverse repo usage has been steadily above the $2 trillion mark since June.

The reverse repo facility takes cash from qualified financial firms in what is an actual loan from the Federal Reserve. The current rate is 4.3%, a yield that is often better than rates for short-term private sector lending.

The reverse repo facility is designed to provide a soft floor for short-term rates and the federal funds target rate, and is the Fed’s primary tool for achieving its function and inflationary mandates. To mark the higher end of the range, the Fed is also pushing deposit-taking banks to deposit cash at the central bank, where the interest rate on reserve balances is now 4.4%.

The federal funds rate is currently set between 4.25% and 4.5% and is trading at 4.33% as of Friday, sandwiched between the reverse repo rate and interest on reserve balances.

There are no signs of shrinkage

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Even with the heavy use of reverse repo, Fed officials have always remained unconcerned about large outflows, even as some in financial markets worried about the potential for the Fed to drain the borrowing and lending lives of private money markets.

Fed officials also expected that as the central bank continues to raise interest rates with the goal of bringing down very high levels of inflation, the use of the reverse repo facility should decrease. But that hasn’t happened yet, and some in the markets now believe that the consistently high utilization of the Fed facility will be around for some time to come.

Research by the Federal Reserve Bank of New York indicated that banking regulation issues make demand for the Fed’s reverse repo instrument high. Meanwhile, the Kansas City Fed added its view that large inflows are related to limited private market investment opportunities and policy uncertainty.

Strong cash flows to the central bank may not have alarmed central banks, but they have driven their operations to an actual loss. The Federal Reserve finances itself through interest on the bonds it owns as well as the services it provides to the financial community. It usually makes a noticeable profit and by law returns it to the treasury.

Currently, the cost of paying interest on reverse repo agreements and reserve balances outweighs income. The Fed reported Thursday that as of Dec. 28, the accounting metric it uses to track losses was $18 billion. Many observers expect that the Fed’s plans to raise interest rates further and keep them at high levels will mean fairly large losses for the central bank over time, even if these losses will not affect the action of the Fed’s monetary policy.

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